Buy-Rated Big-Bank Stocks to Trade Pre-Earnings

TheStreet.com

NEW YORK (TheStreet) -- Today I provide the 17 buy- or strong-buy-rated stocks in the PHLX KBW Banking Index BKX , as these bank stocks should be considered "buy and trade" candidates in 2013.

The BKX includes the four banks considered "too big to fail." If you are already long any of these stocks you should consider shifting from a "buy and hold" investment strategy to a "buy and trade" strategy to take advantage of the ups and downs in the price of a stock; use GTC Limit Orders to buy weakness to a value level, and to sell strength to a risky level.


The daily chart for BKX ($52.89) is overbought with the 21-day, 50-day and 200-day simple moving averages at $51.34, $49.78 and $47.77. The BKX traded to a 52-week high at $53.76 on Jan. 4 vs. this week's risky level at $53.69.

My monthly and semiannual value levels lag at $47.92 and $47.58, which is the downside risk on a disappointing earnings season. The upside potential is to the April 2010 high at $58.81.

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Chart Courtesy of Thomson/Reuters

The finance sector is 12.8% overvalued and there are four of 16 sectors more overvalued. Between Friday and Jan. 28, the 17 banks I am profiling report their fourth-quarter earnings results, with 13 of them like a wave between Jan. 15 and Jan. 18. Today's table shows the date each bank reports and the current EPS estimate.

At www.ValuEngine.com we show two of the 17 stocks rated strong buy and 15 stocks rated buy. We show six bank stocks overvalued by 0.4% to 14.6% overvalued. The other 11 are undervalued by 1.9% to 30.9% undervalued.

All 17 stocks had double-digit returns over the past 12 months with gains of 14.0% to 83.2%. The forecast one-year returns are not that robust, between 5.5% and 12.9%. Five of the banks have single-digit price-to-earnings ratios and 12 have reasonable P/E between 10.0 and 19.1.

Only one of the 17 bank stocks is trading below its 200-day simple moving averages so reversion to the mean is an issue in 2013.

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.


Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a Black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number are projected to move higher by that percentage over the next 12 months.

Value Level: The price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the timeframe noted.

Risky Level: The price at which to enter a GTC Limit Order to sell on strength.

On Friday, Jan. 4, I wrote 10 Themes for the New Millennium Teen Years and the third theme is that, "the upside for money center and regional banks will be limited in 2013. So far the BKX is up 3.1% in 2013.

Today I profile 8 of the BKX that continue to be "buy and trade" candidates:

Bank of America BAC ($11.43) has been upgraded to strong buy from buy since the last post on Dec. 6. The stock has an overvalued daily chart after setting a 52-week high at $12.20 on Jan. 7.

The weekly chart is positive with the five-week modified moving average at $10.87 and the 200-week SMA at $11.63. My monthly value level is $10.13 with a weekly pivot at $12.12 and annual risky level at $17.07.

BB&T BBT ($30.04) still has a buy rating and has an overbought daily chart profile and is trading below its 200-day SMA at $30.68 after setting a multi-year high at $34.37 on Sept. 14.


The weekly chart is positive with the five-week MMA at $29.43 and the 200-week SMA at $26.85. My monthly value level is $28.51 with a quarterly pivot at $30.43 and quarterly risky level at $31.83

Citigroup C ($42.04) still has a buy rating and has an overbought daily chart after setting a 52-week high at $43.25 on Wednesday.

The weekly chart profile is overbought with the five-week MMA at $38.98 and the 200-week SMA at $36.73. My annual value level is $33.19 with a weekly pivot at $40.55 and quarterly risky level at $49.19.

JP Morgan Chase JPM ($45.47) still has a buy rating and an overbought daily chart and faded off a day's high at $46.20 on Wednesday.

The weekly chart profile is overbought with the five-week MMA at $43.38 and the 200-week SMA at $39.44. My annual value level is $42.87 with an annual pivot at $44.04 and semiannual risky level at $46.84.

Regions Financial RF ($7.30) still has a strong buy rating and has an overbought daily chart profile and the stock has met strong resistance at $7.75 since mid-Sept.

The weekly chart profile is positive with the five-week MMA at $7.04 and the 200-week SMA at $6.13. My monthly value level is $6.95 with a weekly pivot at $7.38.

SunTrust Banks STI ($28.71) still has a buy rating and a neutral daily chart with the stock trading below its Sept 14 high at $30.79.

The weekly chart profile is positive with the five-week MMA at $28.04 with the 200-week SMA at $23.57. My annual value is $21.60 with a monthly pivot at $28.01.

US Bancorp USB ($33.27) still has a buy rating and a positive daily chart with the stock trading below its Oct 5 multi-year high at $35.46.

The weekly chart profile is positive with the five-week MMA at $32.62. My quarterly value level is $31.82 with a monthly pivot at $33.13 and quarterly risky level at $36.06.

Wells Fargo WFC ($34.71) still has a buy rating and a positive daily chart profile with the stock trading below its Sept. 14 high at $36.60.

The weekly chart profile is positive with the five-week MMA at $34.05. My annual value level is $32.82 with an annual pivot at $34.17 and quarterly risky level at $36.82.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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